Top 10 Worst Estate Planning Mistakes!
This is just one list of the worst estate planning mistakes. There are dozens of mistakes that people make with their estate planning. This is my list of the 10 worst mistakes I see in my practice.
Don't be fooled by how common or ordinary these mistakes seem. There very ordinariness is what makes them so dangerous to the family.
1. Not Having An Estate Plan:
This mistake should really need no explanation. It is the worst mistake of all because it leaves your family and you completely exposed. You are reliant on the legal system of your State to take care of your property; your spouse and your children. Generally, this is not the preferred way to take care of your loved ones.
2. Thinking You Don't Need An Estate Plan:
This is a common mistake that usually leads to the first mistake. There are several reasons that people believe that estate planning is not necessary. They think they don't have enough property or they don't have family that depends on them.
These factors could be present, however, the truth is that there are very few people who don't need some kind of planning. Even if you have no property ( a rare circumstance) or if you have no family, you would still want to protect yourself from disability.
3. Not Properly Protecting Your Children:
Children and their protection is a primary goal of estate planning. This is crucial if your children are young or disabled. A proper estate plan will allow your kids to be raised by those you trust, in the manner you support and the financial future of your kids to be protected.
4. Not Knowing How to Calculate the Size of Your Estate:
Many people who don't pursue an estate plan fail to do so because they think they don't have a large enough estate. Unfortunately, approximately 96% of all clients don't know how to calculate their estate.
Invariably, people forget something that creates estate value when they tell me how much they are worth. They routinely forget life insurance (See, the next mistake!), pension plans and other assets.
When you do your estate plan, learning how to correctly calculate your estate is one of the initial steps.
5. Not Including Life Insurance When Calculating Your Estate:
As just referred to, many people fail to include their life insurance when considering their estate size. They do this because people remember that life insurance is income tax free. However, it is not estate tax free and if you own or control the insurance policy, it is part of your estate.
Insurance proceeds alone can be significant and if not planned for, can create havoc in your plan.
6. Creating a Will From an Online Form:
Most experts (and I) agree that online or fill-in-the-blank forms are an inappropriate estate planning solution. Why? They don't work, people fill them out incorrectly and they create numerous unintended consequences.
7. Having Just a Will:
A Will, while important, is not an estate plan. The Will is just one component to every estate plan. The plan should also include, at a minimum, Durable Powers of Attorney, Living Wills, and tax and probate analysis.
8. Not Synching Beneficiary Designations With Your Plan:
Many people have benefits from work, insurance policies and IRA's. All your beneficary designations need to be coordinated with your estate plan. Failing to do so will mean the plan will fail.
9. Not Considering Tax Consequences:
Almost everything we do has tax consequences, including our estate planning. Congress has changed our estate tax rules repeatedly over the past several years and more changes are coming.
It is vital to the integrity of your plan to consider how these tax rules work and how changes to those rules impact yourself, your family and your plan.
10. Not Working With an Estate Planning Expert:
Even though I am a fan of the movie, My Cousin Vinnie, the truth is your cousin, uncle, brother, sister or neighbor cannot help you with your estate plan. Unless they are a full time estate planning specialist, you should stay away from their amateur estate planning approaches and ideas.
I can't tell you how many times we have had to re-do or clean up estate planning documents that came from a non-expert source. I recommend to all clients to view their estate plan like their medical care. They would not let their cousin perform surgery on them so don't let that same cousin try and do their estate plan. Like surgery, estate planning is best done by experts.
That's my list of the top 10 worst estate planning mistakes. Do you have your own? What do you think of this list? Please comment on your thoughts and experiences. Thank you.
Great post Bernie! Another mistake that happens is when executors or personal representatives can't find the information they need to settle the estate. EstateLogic is a safe, secure alternative for getting the right information in an executor's hands. www.ExecutorsResource.comReplyDelete